Belinda owns a 30% profit and loss interest in the BOW LLC and her basis in the interest is $30,000, excluding her share of the LLC's liabilities. Belinda guarantees a $40,000 LLC debt. Remaining liabilities (not guaranteed by any of the LLC members) are $100,000 . Belinda's basis in the LLC is $100,000
a. True
b. False
Indicate whether the statement is true or false
True
RATIONALE: Belinda's $30,000 basis is increased by her share of the LLC's liabilities. The $40,000 liability that Belinda guarantees is allocated completely to her. The remaining $100,000 of debt is allocated according to the partners' profit-sharing ratios, with $30,000 allocated to Belinda. Belinda's basis, then, is $100,000 ($30,000 basis + $40,000 guaranteed debt + $30,000 share of nonrecourse debt).
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